CITATION: Alford Building & Construction Pty Ltd v Commissioner for Fair Trading [2005] NSWADT 254 DIVISION: General Division APPLICANT PARTIES: Alford Building & Construction Pty Ltd RESPONDENT Commissioner for Fair Trading FILE NUMBER: 053059 HEARING DATES: 3/06/2005 SUBMISSIONS CLOSED: 07/01/2005 DATE OF DECISION: 11/15/2005 BEFORE: Montgomery S - Judicial Member APPLICATION: Home Builder - issue of contractor licence - Home Building Act - home builder - issue of contractor licence MATTER FOR DECISION: Principal matter Administrative Decisions Tribunal Act 1997 LEGISLATION CITED : Home Building Act 1989 Home Building Regulation 2004 Licensing and Registration (Uniform Procedures) Act 2002 CASES CITED: APPLICANT REPRESENTATION: D Doyle, solicitor RESPONDENT V Griswold, Legal Officer ORDERS: The decision under review is affirmed REASONS FOR DECISION 1 Mr Keith Sharpe has been a bricklayer and stonemason for the past 30 years and has held a number of licences relevant to the building industry. He is the sole director of Alford Building & Constructions Pty Ltd ("the Company"). On 21 July 2004 Mr Sharpe lodged an application on behalf of the Company for a Contractor Licence under the Home Building Act 1989 ("the HBA"). The Office of Fair Trading considered the application and a delegate of the Commissioner determined to refuse to grant the licence. 2 The Company did not lodge the application for an internal review of the Commissioner's decision within the prescribed 28-day period after the refusal. The Commissioner subsequently refused to accept the Company's late application for internal review. The Company applied to the Tribunal for a review of the decision to refuse the application and a determination was made pursuant to section 55 of the Administrative Decisions Tribunal Act 1997 to deal with the application in the absence of an internal review. Applicable legislation 3 Section 20(2) of the of the HBA provides that the regulations may fix or provide for the Commissioner to determine standards or other requirements that must be met before any licence is issued or before a licence of a Particular kind is issued. 4 Section 20(3)(a) of the HBA specifies that the Commissioner must reject an application for a licence if the Commissioner is not satisfied that any such requirement would be met were the licence to be issued. 5 Section 20(5) of the HBA provides that the Administrative Decisions Tribunal cannot review a decision of the Commissioner relating to determining standards or other requirements under section 20(2). 6 Clause 25(1)(a)(iv) of the Home Building Regulation 2004 ("the Regulation") specifies that, before a licence is issued, the Commissioner must be satisfied that each director of a company application, is a fit and proper person to hold the contractor licence and is otherwise of good character. 7 Clause 25(1)(a)(xi) of the Regulation specifies that before a licence is issued, the Commissioner must be satisfied that each director of a company applicant was not, was not a director, partner or person concerned in the management of a company or partnership that was disqualified from holding an authority within 3 years before the date of the application, unless the Director-General is satisfied that the applicant took all reasonable steps to prevent the conduct that led to the disqualification 8 Clause 25(1)(a)(xii) of the Regulation specifies that, before a licence is issued, the Commissioner must be satisfied each director of a company applicant is not bankrupt or a director or person concerned in the management of a company that is the subject of a winding up order or for which a controller or administrator has been appointed. 9 Clause 25(1)(a)(xiii) of the Regulation specifies that, except in relation to an application for a tradesperson certificate, before a licence is issued, the Commissioner must be satisfied that each director of a company applicant was not, within the period of 3 years before the date of the application, bankrupt or a director or person concerned in the management of a company when the company was the subject of a winding up order or when a controller or administrator was appointed. Background 10 In the reasons provided for the refusal the application, the Commissioner's delegate indicated that the application was refused under section 20(3)(a) of the HBA and clause 25(1)(a)(xii) of the Regulation as the Commissioner was not satisfied that Mr Sharpe is not a director of a company that is the subject of a winding up order or for which a controller or administrator has been appointed. It was further stated that Mr Sharpe did not disclose in the application for a contractor licence for the Company that he was the director of a company that was currently in liquidation. 11 In addition, the application was refused under clause 25(1)(a)(iv) of the Regulation as the Commissioner could not be satisfied that 'each director of a company application, is a fit and proper person to hold the contractor licence and is otherwise of good character'. 12 The Company's application, dated 21 July 2004, listed Mr Sharpe as the sole director and indicated that his date of birth was 12-12-1958. The questions posed in the application form include the following: "10. Has any director/member in the last 3 years been bankrupt or assigned their property to pay debts or ever been a director or manager of a company which was subject to a winding up order, placed in receivership or administration, or under official management, had a controller appointed or entered into other arrangements with creditors due to insolvency?" 13 The box "NO" was ticked in response to question number 10. 14 Keith William Sharpe, birth date of 12 December 1958, is listed with ASIC as the sole director and secretary for the Company. He assumed those roles on 14 July 1998. Keith William Sharpe, birth date of 12 December 1958 is listed with ASIC as the sole director and secretary for Cabra Construction Pty Limited, and assumed the role of director on 4 December 1985, and the role of secretary on 12 June 1998. 15 Keith William Sharpe, birth date of 1 February 1958, is listed as the sole director and secretary of Alford Constructions Pty Limited and assumed the role of director on 13 May 1992, and the role of secretary on 2 April 1998. 16 Keith William Sharpe, birth date of 1 February 1958, was the sole director and secretary of KS Construction Pty Limited ("KS Construction"). He assumed both roles on 28 June 2000. 17 Keith William Sharpe provided Notice of Meeting of Creditors for KS Construction on 13 August 2004. The Notice was issued "By Order of the Board" of which Mr. Sharpe was the sole member. It listed an estimated contingent liability deficiency of $44,000.00. A "Notification of Appointment of Liquidator" was filed on 27 August 2004. A "Notification of Resolution Winding Up The Company" was filed on 2 September 2004. A "Presentation of Liquidator's Account And Statement" was filed on 29 March 2005. The Company's case 18 Mr Sharpe said that his correct date of birth is 1 February 1958. He does not dispute that he was the director of KS Construction or that that company was wound up. However, he points to the fact that KS Construction was not in liquidation at the date of lodgement of the licence application. The appointment of the liquidator and the resolution to wind up the Company were well after the date of the licence application. Mr Sharpe says that these were not calculated or fraudulent acts, but the result of a snap decision based upon incorrect information received at the time. He says that KS Construction was voluntarily wound up when it appeared that it could not continue to trade after WorkCover applied an interpretation of the meaning of "deemed employee" to the sub-contractors who KS Construction had employed in previous years. In his affidavit sworn 22 February 2005 Mr Sharpe stated: "74. In or about June of 2004, I was told that Workcover were to conduct an audit of the books of the company which were held by the accountant of the company, Ashton Brailey & Co. Accountants. 75. Thereafter I was telephoned and received correspondence from a WorkCover official. In that conversation I was told that persons not registered for GST would be deemed as "employees". I was surprised at this information as these persons were not on our books as employees. 76. In or around August of 2004, following the winding up of K S Constructions, all work was facilitated through Alford Constructions. 77. I was aware from others in the Industry that if an audit done on K S Constructions found that there was employees who should have been covered under by workers compensation, this would result in hefty fines which I knew I could not afford. 78. I understood that unless I wound up the company before the results of the audit became known, I would be personally responsible for any such debts. I knew that those monies could not be found in the company. I knew also that I could not afford to fight the apparent outcome of such an audit as legal and accountancy fees from experts are so expensive. 79. I had heard from another bricklayer that WorkCover had fined him $50,000 and he had only 2 employees and had only been trading 2 or 3 years. It was this information which led me to wind up K S Constructions. 80. On or about 11th of August, 2004, I contacted Ozem Kassem seeking advice as to the winding up K S Constructions. ... 81. On or about the 17th of August, I received a letter from Ozem Kassem of Bentleys Business Recovery and Insolvency Services confirming the assistance of the company in conducting the meetings to take place in order for K S Constructions to be placed into liquidation." 19 Mr Sharpe contends that at the time he filled out the licence application, he could not have been aware that the company was going to be placed in liquidation. This was because he could not predict that WorkCover would take the approach that it did, and retrospectively deem certain contractors to be employees. Accordingly, Mr Sharpe's failure to declare this issue should not be regarded as a defect in character. Rather, it should be seen as reasonably normal conduct. 20 Mr Sharpe also asks the Tribunal to note that a moratorium was subsequently put in place in relation to workers compensation payments and the definition of a 'deemed employee' for this purpose. 21 Dr. Doyle, Solicitor for the Company, argues that subclause 25(1)(xii) of the Regulation is ultra vires and therefore cannot be applied to prevent the issue of the licence sought. In essence, the argument presented is that the Regulations are inconsistent with the Act. The power to make regulations is found in section 140 of the Act. In part, that section states: "140 Regulations (1) The Governor may make regulations, not inconsistent with this Act, for or with respect to any matter that by this Act is required or permitted to be prescribed or that is necessary or convenient to be prescribed for carrying out or giving effect to this Act. (2) Without affecting the generality of subsection (1), the regulations may make provision for or with respect to the following: (a) contractor licences, supervisor and tradesperson certificates, building consultancy licences and owner-builder permits under this Act, duplicate contractor licences and duplicate supervisor and tradesperson certificates and building consultancy licences under the regulations and permits under the regulations …" 22 Dr. Doyle contends that section 140 of the Act does not make specific reference to 'authorities' of the kind referred to in subclause 25(1)(a)(xii) and that for this reason the Act does not confer power to make regulations with respect to authorities. In support of this argument he submits that it is doubtful that the legislature intended to empower regulations to be made in respect of something that is given different meanings throughout the legislation. He points, for example to clause 55 which deals with disciplinary action and clause 83A which deals with appeals to the Administrative Decisions Tribunal and compares these with the definition of "authority" in section 55 of the Act. The term 'authority' is variously used to describe a contractor licence (whether or not an endorsed contractor licence), or a supervisor or trades person certificate, or an owner-builder permit, or a building consultancy licence. 23 Dr. Doyle further contends that the clause is also ultra vires as the delegated legislation does not fall within the scope or operation of the Act. He submits that the words 'necessary and convenient' found in section 140 of the Act are confined to the express heads of subject matter of the regulations, being one of the heads set out in section 140 of the Act. The particular heads of power must be construed in order to determine whether they support the delegated legislation. Dr. Doyle submits that the clear absence of the term 'authorities' in section 140 of the Act, and secondly by reason of the inconsistency of definitions relating to 'authorities', the clause is void and of no effect. 24 Dr. Doyle says that the effect of the subclause is that a person who has been the Director of a company, which was the subject of a winding up order, would be prohibited from further obtaining a licence. He contends that when this affect is compared with the other provisions of the Regulation, such as subclause (xi) which provides for discretion on the part of the Commissioner, that it is arguable that the holder of a supervisor certificate is required to be given the same status as the holder of a tradesperson certificate and thus be entitled to an exemption from the provisions of clause 25(1)(a)(xii) and (xiii) of the regulations. 25 Dr. Doyle further contends that clause 25(1)(a)(xii) is not intended to apply to circumstances where the relevant company was wound up voluntarily. It only mentions the situation where the company 'is the subject of a winding up order or for which a controller or administrator has been appointed'. Thus, he submits, it is incorrect to say that the Company was subject to a winding up order, which infers that the winding up was ordered by a court of competent jurisdiction. Rather, the company was wound up voluntarily, and therefore does not fit into the definition of 'winding up order' referred to in clause 25(1)(a)(xii) of the Regulation. In support of this argument he refers to amendments to section 22 of the Act. This section was amended by the Home Building Amendment Act 2004, which came into effect on 29 August 2005. Prior to amendment, section 22 provided in part: " 22 Cancellation of contractor licences (1) The Director-General must, subject to the regulations, cancel a contractor licence that authorises its holder to contract to do residential building work or specialist work, or both (whether or not it also authorises the holder to contract to supply kit homes for construction by another person) if. … (d) the holder of the contractor licence is a corporation and it has become the subject of a winding up order under the Corporations Act 2001 of the Commonwealth, or..." 26 Whereas the amended section 22(1)(d) provides: "(d) the holder of the contractor licence is a corporation and it has become the subject of a winding up order under the Corporations Act 2001 of the Commonwealth or has been voluntarily wound up, or... " 27 Dr. Doyle submits that this provision was amended to cure the latent deficiency in the wording of the old section, which did not apply to the act of the voluntarily winding up of a company. He argues that in the legislative scheme which is applicable to this case it is plain that clause 25(1)(a)(xii) had no application to a voluntary winding up since there are so many valid reasons why companies are wound up by their members on retirement, or leaving the industry or in re-structuring their commercial affairs. In his submission, only voluntary windings up which affect the financial ability of the director should be considered in respect of renewals, since there could be no basis for having regard to a solvent voluntary winding up of a corporation that held a licence. 28 Dr. Doyle further submits that even if clause 25(1)(a)(xii) applies in the present circumstances, the Commissioner has power to grant the application under clause 26 of the Regulation. Clause 26 states that: "(2) Despite clause 25(1)(a)(xii), the Director-General may issue a contractor licence if- (a) the licence authorises its holder to do residential building work or specialist work of the kind prescribed by clause 46 (clause 46 (1) (a) and (b) excepted) but not of any other kind, and (b) the Director General is of the opinion that there is no evident risk to the public that the applicant will be unable to complete building contracts entered into in the future for the doing of residential building work or specialist work of that kind, or both, and (c) the licence is subject to a condition that the holder not do work: (i) if the contract price exceeds $12,000 (inclusive of GST) or (ii) if the contract price is not known-where the reasonable cost of the labour and materials involved in the work exceeds $12,000 (inclusive of GST)". 29 The Company says that it undertakes only residential work. There is no challenge as to its qualifications or any risk to the public due to its not being able to complete contracts entered into the future. Dr. Doyle submits that special conditions should be put in place in order to satisfy the Commissioner's concerns. They are as follows: (1) The licence holder undertakes to satisfactorily complete the course known as Business Planning and Financial Management for Building provided by Australian Industry Group for the duration of 2 days and culminating in a Certificate of Achievement; (2) The licence holder undertakes to notify the Commissioner within 3 weeks of any change of address, accountant or auditor of the Company; (3) The licence holder undertakes to file on the anniversary date of the licence granted to the Company copies of all annual accounts and tax filings including BAS statements relating to the Company. 30 Mr Sharpe asserts that the Commissioner can be satisfied that he is a fit and proper person to hold the contractor licence and is otherwise of good character. Mr Sharpe presented no explanation with respect to the difference between the birth dates given on the application in conflict with the previous birth date provided. Dr. Doyle submits that the Department was under a duty to make enquiries because of the impact its decision would have on an applicant. Section 14 of the Licensing And Registration (Uniform Procedures) Act 2002 makes provision for circumstances where further information can be requested by the licensing authority. The Commissioner's case 31 The Commissioner relies on the material filed pursuant to section 58 of the Administrative Decisions Tribunal Act 1997. Ms Griswold presented oral submissions in support of the Commissioner's position and also filed written submissions in reply to those provided by Dr. Doyle. 32 Ms Griswold provided copies of the documents relevant to the winding up of KS Construction. These indicate an estimated contingent liability deficiency of $44,000. 33 Ms Griswold contends that the licence should be refused under clause 25(1)(a)(xii) of the Regulation because the Commissioner could not be satisfied that the sole director of the Applicant company is not a director of a company that is the subject of a winding up order or for which a controller or administrator has been appointed. Mr. Sharpe was the sole director and secretary for KS Construction, a company which debts exceeded its assets by a considerable amount, for which a liquidator was appointed and which was subject to a wind up order. 34 The Commissioner submits that Dr. Doyle's argument that the Regulation is inconsistent with the Act and therefore ultra vires is without merit. It is submitted that there is no inconsistency between the various provisions of the Regulations as Dr. Doyle has asserted. Ms Griswold contends that for all practical purposes they are identical. She submits that the proposition that the term "authorities" is not specifically re-defined in Part 4 Division 1 of the Regulations is irrelevant as the term is used in a way that is wholly consistent with the Act. She submits that any argument from the Applicant in respect of a tradesperson certificate is irrelevant. 35 It is also the Commissioner's submission that Dr. Doyle's argument with regard to the interpretation of section 140 of the Act is also without merit. Section 140 provides the power for the making of regulations under the Act. The Commissioner contends that section 140(1) is the general regulation-making power. Subsection 140(2) lists things about which regulations may be made, and expressly refrains from limiting the generality of subsection 140(1). 36 The Act at Section 20(2) provides a separate specific regulation-making power as follows: "The regulations may fix or provide for the [Commissioner] to determine additional standards or other requirements that must be met before any contractor licence is issued or before a contractor licence of a particular kind is issued." 37 Ms Griswold submits that clause 25 in its entirety is a legitimate exercise of the regulation making powers under section 140 and under section 20(2) of the Act. 38 The application was also refused under clause 25(1)(a)(iv) of the Regulation, as the Commissioner could not be satisfied that each director of the company application is a fit and proper person to hold the contractor licence and is otherwise of good character. Ms Griswold refers to the fact that Mr Sharpe gave different birth dates on the application to those previously provided in relation to other corporations. She submits that this misrepresentation is significant. She submitted that the Dr. Doyle's arguments with respect to the application of the Licensing And Registration (Uniform Procedures) Act 2002 are misconceived and should be rejected. 39 Ms Griswold also refers to the fact that the request for winding up of KS Construction was less than one month after the licence application was submitted. She argues that there is certainly no basis for the Company to argue that the passage-of-time was a relevant circumstance to be considered. Findings 40 I do not agree with Dr. Doyle's argument that subclause 25(1)(xii) of the Regulation is ultra vires and therefore cannot be applied to prevent the issue of the licence sought. I agree with the Commissioner that subsection 140(1) of the Act provides a general regulation-making power. While subsection 140(2) provides that the Regulation may make provision for or with respect to a number of subject matters, it expressly refrains from limiting the generality of subsection 140(1). 41 Subsection 140(1) provides that the Regulation must not be inconsistent with the Act. In my view, subclause 25(1)(xii) of the Regulation is consistent with the Act. 42 The Regulation may be for or with respect to any matter that 'is required or permitted to be prescribed or that is necessary or convenient to be prescribed for carrying out or giving effect to this Act'. Subclause 25(1)(xii) of the Regulation sets out a requirement that must be met before any authority, including a contractor licence, is issued. This is clearly a matter that was convenient to be prescribed for carrying out or giving effect to the Act. 43 I agree with Dr. Doyle's argument that that the practical application of this subclause may be harsh. This harshness may be compounded by the fact that there is no time frame attached to this particular clause. I also agree that it may preclude some persons from obtaining a licence where there is no obvious public policy reason for doing so for example in the case of a solvent voluntary winding up of a corporation. Nevertheless, in my view it does not follow that the Regulation is ultra vires. It is however a matter that should be brought to the attention of the legislature. 44 In my view, subclause 25(1)(xii) of the Regulation will generally preclude the granting of the licence in circumstances such as this. However, there is discretion given to the Commissioner under clause 26 of the Regulation to issue the licence despite the application of subclause 25(1)(a)(xii). I note the suggestion that the licence ought to be granted subject to certain conditions. For this to happen, it would be necessary to conclude that 'there is no evident risk to the public that the applicant will be unable to complete building contracts entered into in the future'. Any risk to the public of this kind will be determined by a consideration of the Company's circumstances and in particular its financial circumstances. I have no evidence before me on which I can base such a determination. I therefore have no basis on which I can form the view that the discretion provided for by clause 26 of the Regulation ought to be exercised. 45 Similarly, in the absence of any explanation with respect to the issue of provision of conflicting dates of birth I am unable to make any finding with respect to why Mr Sharpe provided those dates. While there is no onus of proof in these matters, this is information that would only be held by Mr Sharpe. I do not accept that there was any obligation on the Commissioner to take action pursuant to the Licensing And Registration (Uniform Procedures) Act once the issue had been raised. 46 If Mr. Sharpe or the Company had knowledge of persuasive and relevant facts regarding the matter before the Tribunal, and the Commissioner did not know those facts, common sense dictates that he or it should have put the material before the Tribunal. 47 In the circumstances it is my view that subclause 25(1)(xii) of the Regulation precludes the granting of the licence. There is no basis for exercising the discretion provided for by clause 26 the Regulation. Accordingly, the correct and preferable decision was to refuse the application. It follows that the decision under review should be affirmed. This does not preclude the Company from making a fresh application and providing evidence on which the Commissioner could make the decision to exercise the clause 26 discretion. Order The decision under review is affirmed. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.